Cisco Systems(CSCO) - 2024 Q4 - Annual Results

Earnings Summary Cisco's financial results for Q4 and full fiscal year 2024 are presented, including key performance metrics and future guidance Fourth Quarter (Q4) FY 2024 Performance Cisco's Q4 FY2024 saw revenue decline but strong product order growth, with EPS significantly impacted by the Splunk acquisition Q4 FY 2024 Financial Results vs. Q4 FY 2023 | Metric | Q4 FY 2024 | Q4 FY 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenue | $13.6 billion | $15.2 billion | -10% | | GAAP Net Income | $2.2 billion | $4.0 billion | -45% | | GAAP EPS | $0.54 | $0.97 | -44% | | Non-GAAP Net Income | $3.5 billion | $4.7 billion | -25% | | Non-GAAP EPS | $0.87 | $1.14 | -24% | - Product order growth was strong at 14% year-over-year, or 6% when excluding the contribution from the newly acquired Splunk[2] - The acquisition of Splunk, including financing costs, negatively impacted Q4 GAAP EPS by $0.16 and Non-GAAP EPS by $0.04[5][6] Fiscal Year (FY) 2024 Performance Cisco's FY2024 revenue decreased 6% to $53.8 billion, while achieving a 20-year high Non-GAAP gross margin and strong recurring revenue growth FY 2024 Financial Results vs. FY 2023 | Metric | FY 2024 | FY 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenue | $53.8 billion | $57.0 billion | -6% | | GAAP Net Income | $10.3 billion | $12.6 billion | -18% | | GAAP EPS | $2.54 | $3.07 | -17% | | Non-GAAP Net Income | $15.2 billion | $16.0 billion | -5% | | Non-GAAP EPS | $3.73 | $3.89 | -4% | - Total Annualized Recurring Revenue (ARR) reached $29.6 billion, up 22% year-over-year, which includes a $4.3 billion contribution from Splunk[2] - Total software revenue for FY2024 was $18.4 billion, an increase of 9% YoY, with software subscription revenue comprising 89% of this total[2] Business Outlook Cisco projects Q1 FY2025 revenue between $13.65 billion and $13.85 billion, with full fiscal year 2025 revenue anticipated at $55.0 billion to $56.2 billion Q1 FY 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $13.65 billion - $13.85 billion | | Non-GAAP Gross Margin | 67% - 68% | | Non-GAAP Operating Margin | 32% - 33% | | GAAP EPS | $0.35 - $0.42 | | Non-GAAP EPS | $0.86 - $0.88 | Full Year FY 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $55.0 billion - $56.2 billion | | GAAP EPS | $1.93 - $2.05 | | Non-GAAP EPS | $3.52 - $3.58 | Detailed Financial Highlights A detailed breakdown of Cisco's Q4 and full fiscal year 2024 financial results is presented, covering revenue, operating metrics, and capital allocation Q4 FY 2024 Financial Details Q4 FY2024 revenue declined 10% to $13.6 billion, with product revenue down 15%, while Splunk boosted Security and Observability segments - Splunk contributed approximately $960 million to total revenue in Q4 FY2024[11] Q4 FY 2024 Revenue Performance | Category | Performance (YoY Change) | | :--- | :--- | | By Geography | | | Americas | -11% | | EMEA | -11% | | APJC | -6% | | By Product | | | Networking | -28% | | Security | +81% (+6% excl. Splunk) | | Collaboration | Flat | | Observability | +41% (+12% excl. Splunk) | - Q4 Non-GAAP total gross margin was 67.9%, up from 65.9% in Q4 2023, with Non-GAAP operating expenses increasing by 4% to $4.8 billion[12] - Cash flow from operating activities for Q4 was $3.7 billion, a decrease of 37% compared to the same quarter last year[13] FY 2024 Financial Details FY2024 total revenue decreased 6% to $53.8 billion, with GAAP net income down 18%, and operating cash flow significantly declining by 45% FY 2024 Key Metrics | Metric | FY 2024 Value | YoY Change | | :--- | :--- | :--- | | Total Revenue | $53.8 billion | -6% | | GAAP Net Income | $10.3 billion | -18% | | GAAP EPS | $2.54 | -17% | | Non-GAAP Net Income | $15.2 billion | -5% | | Non-GAAP EPS | $3.73 | -4% | - Cash flow from operating activities for fiscal 2024 was $10.9 billion, a significant decrease of 45% compared with $19.9 billion for fiscal 2023[14] Balance Sheet and Capital Allocation Cisco ended FY2024 with $17.9 billion in cash, strong RPO growth to $41.0 billion, and returned $3.6 billion to shareholders in Q4 - Cash and cash equivalents and investments totaled $17.9 billion at the end of fiscal 2024, down from $26.1 billion at the end of fiscal 2023[14] - Total Remaining Performance Obligations (RPO) grew 18% to $41.0 billion, with product RPO up 27%, and deferred revenue increased 11% to $28.5 billion[15] Q4 FY 2024 Capital Allocation | Allocation Type | Amount | | :--- | :--- | | Share Buybacks | $2.0 billion | | Dividends Paid | $1.6 billion | | Total Returned | $3.6 billion | - Cisco declared a quarterly dividend of $0.40 per common share[9] Consolidated Financial Statements Cisco's consolidated financial statements are presented, detailing statements of operations, balance sheets, cash flows, and revenue breakdowns by segment and product group Consolidated Statements of Operations FY2024 total revenue decreased 6% to $53.8 billion, with operating expenses rising 9%, leading to a 19% decline in operating income and an 18% drop in net income FY 2024 vs. FY 2023 Statement of Operations (in millions) | Line Item | Fiscal Year 2024 | Fiscal Year 2023 | | :--- | :--- | :--- | | Total Revenue | $53,803 | $56,998 | | Gross Margin | $34,828 | $35,753 | | Operating Income | $12,181 | $15,031 | | Net Income | $10,320 | $12,613 | | Diluted EPS | $2.54 | $3.07 | Revenue and Gross Margin by Segment Q4 FY2024 revenue declined across all geographic segments, with Americas being the largest contributor for the full year and EMEA reporting the highest gross margin Revenue by Geographic Segment (YoY % Change) | Segment | Q4 FY 2024 | Full Year FY 2024 | | :--- | :--- | :--- | | Americas | (11)% | (4)% | | EMEA | (11)% | (7)% | | APJC | (6)% | (8)% | | Total | (10)% | (6)% | Gross Margin Percentage by Segment (Full Year FY 2024) | Segment | Gross Margin % | | :--- | :--- | | Americas | 66.8% | | EMEA | 69.1% | | APJC | 67.2% | Revenue by Product and Service Groups Q4 FY2024 saw Networking revenue decline 28%, offset by strong growth in Security and Observability driven by Splunk, while services revenue grew 6% Revenue by Product/Service Group (YoY % Change) | Group | Q4 FY 2024 | Full Year FY 2024 | | :--- | :--- | :--- | | Networking | (28)% | (15)% | | Security | 81% | 32% | | Collaboration | —% | 2% | | Observability | 41% | 27% | | Total Product | (15)% | (9)% | | Services | 6% | 5% | - Excluding the impact of Splunk, the Security segment grew 6% in Q4 and 4% for the full fiscal year, while the Observability segment grew 12% in Q4 and 15% for the full year[25] Condensed Consolidated Balance Sheets As of July 27, 2024, total assets increased to $124.4 billion, driven by goodwill from acquisitions, while total liabilities rose to $79.0 billion due to increased debt Key Balance Sheet Items (in millions) | Item | July 27, 2024 | July 29, 2023 | | :--- | :--- | :--- | | Total Current Assets | $36,862 | $43,348 | | Goodwill | $58,660 | $38,535 | | Total Assets | $124,413 | $101,852 | | Total Current Liabilities | $40,584 | $31,309 | | Long-term Debt | $19,621 | $6,658 | | Total Liabilities | $78,956 | $57,499 | | Total Equity | $45,457 | $44,353 | Consolidated Statements of Cash Flows FY2024 operating cash flow decreased 45% to $10.9 billion, while investing activities used $20.5 billion primarily for acquisitions, funded partly by $6.8 billion from financing activities FY 2024 vs. FY 2023 Cash Flow Summary (in millions) | Activity | Fiscal Year 2024 | Fiscal Year 2023 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $10,880 | $19,886 | | Net Cash used in Investing Activities | ($20,478) | ($5,107) | | Net Cash from/(used in) Financing Activities | $6,844 | ($11,626) | Key Business Metrics FY2024 saw RPO grow 18% to $41.0 billion, with total deferred revenue at $28.5 billion, and $12.15 billion returned to shareholders through dividends and repurchases Remaining Performance Obligations (RPO) (in millions) | Category | July 27, 2024 | YoY Change | | :--- | :--- | :--- | | Product | $20,055 | 27% | | Services | $20,993 | 10% | | Total | $41,048 | 18% | Deferred Revenue (in millions) | Category | July 27, 2024 | | :--- | :--- | | Product | $13,219 | | Services | $15,256 | | Total | $28,475 | FY 2024 Dividends and Repurchases (in millions) | Quarter | Dividends Paid | Stock Repurchased | | :--- | :--- | :--- | | Q4 2024 | $1,606 | $2,002 | | Q3 2024 | $1,615 | $1,256 | | Q2 2024 | $1,583 | $1,254 | | Q1 2024 | $1,580 | $1,252 | Reconciliation of GAAP to Non-GAAP Measures Cisco's GAAP financial results are reconciled to Non-GAAP measures for net income, EPS, and operational metrics, including future guidance adjustments GAAP to Non-GAAP Net Income and EPS Reconciliation FY2024 GAAP net income of $10.3 billion was reconciled to Non-GAAP net income of $15.2 billion, primarily adjusted for share-based compensation and amortization, resulting in a Non-GAAP EPS of $3.73 FY 2024 GAAP to Non-GAAP Net Income Reconciliation (in millions) | Description | Amount | | :--- | :--- | | GAAP Net Income | $10,320 | | Share-based compensation expense | $3,051 | | Amortization of acquisition-related intangible assets | $1,634 | | Acquisition-related/divestiture costs | $734 | | Significant asset impairments and restructurings | $789 | | Other adjustments & tax effects | $103 | | Non-GAAP Net Income | $15,150 | FY 2024 GAAP to Non-GAAP EPS Reconciliation | Description | Amount | | :--- | :--- | | GAAP EPS | $2.54 | | Share-based compensation expense | $0.75 | | Amortization of acquisition-related intangible assets | $0.40 | | Acquisition-related/divestiture costs | $0.18 | | Significant asset impairments and restructurings | $0.19 | | Other adjustments & tax effects | ($0.33) | | Non-GAAP EPS | $3.73 | GAAP to Non-GAAP Detailed Line Item Reconciliation FY2024 Non-GAAP total gross margin was 67.5% (vs. 64.7% GAAP) and Non-GAAP operating margin was 34.2% (vs. 22.6% GAAP), reflecting significant operating expense adjustments FY 2024 GAAP vs. Non-GAAP Margins | Margin Type | GAAP | Non-GAAP | | :--- | :--- | :--- | | Total Gross Margin | 64.7% | 67.5% | | Operating Margin | 22.6% | 34.2% | - For FY2024, total adjustments to GAAP operating expenses were $4.7 billion, primarily consisting of share-based compensation ($2.5B), amortization of intangibles ($0.7B), and restructuring charges ($0.8B)[37][47] GAAP to Non-GAAP Guidance Reconciliation Cisco's Q1 FY2025 GAAP EPS guidance of $0.35-$0.42 is reconciled to Non-GAAP EPS of $0.86-$0.88, reflecting adjustments for share-based compensation, amortization, and a new restructuring plan Q1 FY 2025 GAAP to Non-GAAP EPS Guidance Reconciliation | Description | EPS Impact | | :--- | :--- | | GAAP EPS | $0.35 - $0.42 | | Share-based compensation expense | $0.16 - $0.17 | | Amortization & acquisition costs | $0.17 - $0.18 | | Significant asset impairments and restructurings | $0.13 - $0.16 | | Non-GAAP EPS | $0.86 - $0.88 | - Cisco announced a new restructuring plan expected to result in pre-tax charges of up to $1 billion, with approximately $700 million to $800 million to be recognized in the first quarter of fiscal 2025[51]